COVID-19: the European Commission authorizes a Finnish aid to compensate Finnair's damage

On 12 March 2021, the European Commission has approved an aid measure of EUR 351.38 million to compensate for the damage suffered by Finnair as a result of the measures taken by Finland, the EU and other third countries to limit the spread of COVID-19.

The measures approved by the Commission on 19 May 2020 (state guarantee for a loan) and 10 June 2020 (recapitalisation measure) were not sufficient to enable Finnair to overcome the financial difficulties encountered due to the COVID-19 crisis. The Finnish authorities have therefore notified an additional aid measure to compensate for the damage suffered by this airline company between 16 March and 31 December 2020 on the basis of Article 107(2)(b) TFEU. The aid takes the form of a hybrid loan of EUR 351.38 million.

Article 107(2)(b) TFEU allows the Commission to declare compatible with the internal market "aid to make good the damage caused by natural disasters or exceptional occurrences". In this respect, the Commission considers that the coronavirus pandemic constitutes an "exceptional occurrence" because of its exceptional and unpredictable nature and its significant impact on the economy.

In this case, the restrictions adopted by Finland and other European countries to limit the spread of the virus have had a significant impact on the activities of Finnair, which has suffered substantial operating losses during the year 2020. The notified aid measure is thus intended to compensate Finnair for the damage suffered in particular during the periods from 16 March to 30 June as a result of the travel restrictions imposed in Finland, the EU and third countries, as well as from July until the end of December for losses caused by the travel restrictions still in force or by new restrictions that have had an impact on certain routes only.

The Commission found that the Finnish measure will compensate Finnair for the damage directly linked to the COVID-19 pandemic, i.e. for the loss of revenue on all operations between 16 March and 30 June 2020 as well as on certain routes between 1 July and 31 December 2020. The amount of aid corresponds to the loss of revenue over these periods, plus the additional costs incurred as a result of the pandemic, less any costs avoided such as, for example, those resulting from temporary unemployment The Commission also considered that the measure is proportionate, including after June 2020, as the quantitative "route-by-route" analysis submitted by Finland adequately identifies the damage attributable to the containment measures and therefore the compensation does not go beyond the amount necessary to remedy the damage on these routes. A mechanism is also provided to avoid any overcompensation of the damage suffered.

Finally, it should be noted that in view of the previous measures adopted in favour of Finnair (and approved by the Commission in spring 2020), the Commission verified that the new measure (compensation for the damage) does not cause overcompensation with regard to the other aid already granted in the context of the COVID-19 crisis.

This new Commission decision taken on the basis of article 107(2)(b) TFEU is quite revealing of the careful examination made by the Commission in the way of calculating the damage suffered by the airlines after the period of the first confinement. Indeed, for the subsequent period, compensation for damage is still possible, but only for routes subject to travel restrictions imposed by the EU States. The calculation of the damage is therefore made on a route by route basis.

In view of the travel restrictions still in force in a large number of Member States, new aid measures to compensate airlines for damage will certainly be adopted in the coming weeks and months. This possibility of compensation is also available to airports, regardless of the form of aid envisaged (subsidy, deferral or waiver of concession fees, recovery of investments, etc.).

It should be recalled that many other aids have already been authorised by the European Commission on the basis of Article 107(2)(b) TFEU in the air transport sector.In September and October 2020, the Commission authorized an Italian subsidy for Alitalia and the Romanian aid for Tarom. In November, the Commission approved a Romanian aid scheme for regional airport operators. More recently, a new aid to Alitalia was approved on the same European legal basis. There is also the recent aid approved by the Commission in favour of Aegean Airlines and the aid to the operator of the airports of Pisa and Florence.